Chapter 1

The Value of Understanding Business Valuation

In This Chapter

Why the price of a business is only half the story

The importance of planning in valuation

Basic due diligence

Why families are so important in the process

You’re here for one of two big reasons: You have a business that you want to sell, or you want to buy a business. Very likely, the business in question is a small business (with less than $3 million in annual sales), and it may be the first and only business you ever own.

Before we go further, we want to pay you a compliment. Right now, you’re doing something that painfully few entrepreneurs do: thinking about what a company is actually worth before you make a major decision or take a major action. You’re already ahead of the game. And because you’re reading this book, you obviously know that business valuation is an important part of that game.

Business Valuation For Dummies is for people who want to understand value. This book can help you get your arms around the many tasks and variables involved in effective valuation of a company and help you decide what kind of help you should enlist to complete a deal. In this chapter, we discuss the importance of valuation, talk about doing research and calculating value, and include some notes on valuation experts and intellectual property. We wrap up with a discussion of passing a family business from one generation to the next.

Basic Tenets and the Importance of Valuation for Businesspeople

Everything has a ...

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